CAG for Utility Companies

American Telegraph and Telephone Co. (AT&T), a regulated public utility, must be the envy of other giant corporations. Every quarter, AT&T reports record profits of 18 percent or more. In 1978, the telephone monopoly reported net profits of $5.3 billion–up 19 percent from the prior year and an all-time corporate record in American history.

This gigantic money machine not only is insulated from competition but practically is insulated from the restraints of its regulator–the Federal Communications Commission (FCC). In the early 1970s, the FCC threw in the towel when it admitted not having nearly the resources necessary to fathom the overcomplicated morass of data dumped in its offices by AT&T’s legions.

Once in a while, however, the FCC makes an attempt at representing the powerless consumers. On June 1, 1979, Larry Darby, then chief of the Common Carrier Bureau, informed the seven commissioners of the FCC that AT&T exceeded its legal rate of return, resulting in excess profits during 1978 of about $100 million. A majority of the commissioners refused to order a refund of this sum to consumers as recommended by Darby. That was the last straw for this dedicated civil servant who resigned a few days later.

Some of the commissioners reflected a different theory of relativity than did Darby and his supporters, Chairman Charles Ferris and Commissioner Tyrone Brown. “You’re talking about pennies here for the average subscriber,” snorted Abbott Washburn who voted with the majority to duck by sending it back to the staff for further study. Three and one-half months later the Common Carrier staff suggested and the Commission issued a “Notice of Inquiry” for a public proceeding to determine the precise amount of excess profits and what should be done with them.

No one in the world can work bureaucratic proceedings more profitably than AT&T. Platoons of its employees and lawyers can make time irrelevant and anesthetize the regulators with mind-numbing obscurantism and endless petitions. Delay in such proceedings is AT&T’s stock and trade. In the meantime, $1 million a month is lost in interest which could be used for the benefit of consumers.

In its Notice of Inquiry, the FCC entertained the Possibility that, if each consumer could not practically receive his or her small share of the $100 million, the money could go into a fund to finance consumer challenges to AT&T’s future demands for higher rates or lower service. This alternative would result in much greater savings to consumers over the years than a one-stop refund minus expenses of distributing a few dollars to millions of consumers.

Here is one way this consumer action fund could work. The FCC can charter a consumer action group (CAG) with a professional staff to advocate on the federal level for consumer interests in fair rates and telecommunications policy and practice. Preliminary funding would come from the $100 million. The CAG would be open to any consumers for modest annual membership dues and eventually become self-sustaining. The FCC could issue a rule requiring AT&T to insert a notice to consumers in its monthly billing envelopes about the opportunity to join CAG. That would be the least a monopoly could do for its customers.

At the state level, the FCC could require AT&T to have its local subsidiaries use some of the $100 million in excess profits to provide seed funding for similar consumer action groups to deal with intrastate telephone and telecommunications matters. In this way, nongovernmental consumer groups, open to all, can take root in a self-sustaining manner to provide an informed and regular advocacy for the people who pay the bills.

Readers may wish to communicate their opinions to Chairman Charles Ferris, Federal Communications Commission, Washington, D.C. 20554. The proposal for telephone consumer action groups will be outlined in more detail in a forthcoming report on how to talk back to your telephone company, issued by the National Citizens Committee on Broadcasting, P.O. Box 12038, Washington, D.C. 20005.